Korea / Special Situations, Clepsydra Capital

Sanghyun Park

Korea / Special Situations

Korea / Special Sits, Pairs, Index Rebalancing

Clepsydra Capital

Investigate special situations, pairs, and index rebalancing trades in Korea.

Event-Driven

The Seoul Bankruptcy Court and Anjin Accounting Corporation (the M&amp;A advisory) are scheduled to hold a main bid for the sale of Eastar Jet on June 14. Preliminary bidders who have completed the preliminary due diligence by June 7 are eligible to participate in the main bid. Then, we will likely see the name of a bid winner about a week later, around June 21.Harim Group also issued a letter of intent (LOI). In the case of Harim, Pan Ocean will be an acquiring company.Eastar Jet is a low-cost airline, which has been in financial trouble. It has been undergoing corporate rehabilitation since February this year. Well, Eastar Jet had once found a new owner back in 2019. Aekyung Group won the bid to take over Eastar Jet. However, Aekyung abandoned the acquisition of Eastar Jet last year due to financial insolvency and COVID-19.Harim must acquire a 39.64% controlling stake owned by Eastar Holdings. The sale price of Eastar Jet is about ₩150B. However, the actual cost is estimated to be over ₩300B. Eastar Jet's total debt is about ₩219B, of which 65B is unpaid wages, suggesting that the actual debt that the acquirer has to bear is around ₩200B.<table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Eastar Jet financials, as of 1Q21"}'>Eastar Jet quarterly financials, as of 1Q21</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Sales"}'>Sales</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":90.8}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}'>₩90.8B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Operating profit"}'>Operating profit</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":-35.9}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}'>-₩35.9B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Net profit"}'>Net profit</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":-41}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}'>-₩41.0B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Cash holding"}'>Cash holding</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}'>₩1.0B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Total liabilities"}'>Total liabilities</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":218.7}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}'>₩218.7B</td>
</tr>
<tr>
<td> - Unpaid wages</td>
<td style="text-align: right;">₩64.9B</td>
</tr>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table>Harim plans to use Pan Ocean, a shipping company, as the main vehicle to acquire Eastar Jet. Pan Ocean is the second-largest shipping company in Korea in terms of sales. As of the end of the first quarter, its cash equivalent assets stood at ₩150B. However, Harim is said to be seeking a FI (financial investor).What is Harim's big picture here, business-wise? Pan Ocean can expand its aviation logistics business by leveraging Eastar Jet's aviation resources. Harim plans to grow into a more comprehensive logistics company that encompasses sea and air.

The Seoul Bankruptcy Court and Anjin Accounting Corporation (the M&amp;A advisory) are scheduled to hold a main bid for the sale of Eastar Jet on June 14. Preliminary bidders who have completed the preliminary due diligence by June 7 are eligible to participate in the main bid. Then, we will likely see the name of a bid winner about a week later, around June 21.Harim Group also issued a letter of intent (LOI). In the case of Harim, Pan Ocean will be an acquiring company.Eastar Jet is a low-cost airline, which has been in financial trouble. It has been undergoing corporate rehabilitation since February this year. Well, Eastar Jet had once found a new owner back in 2019. Aekyung Group won the bid to take over Eastar Jet. However, Aekyung abandoned the acquisition of Eastar Jet last year due to financial insolvency and COVID-19.Harim must acquire a 39.64% controlling stake owned by Eastar Holdings. The sale price of Eastar Jet is about ₩150B. However, the actual cost is estimated to be over ₩300B. Eastar Jet's total debt is about ₩219B, of which 65B is unpaid wages, suggesting that the actual debt that the acquirer has to bear is around ₩200B.





Eastar Jet quarterly financials, as of 1Q21

Sales
₩90.8B


Operating profit
-₩35.9B


Net profit
-₩41.0B


Cash holding
₩1.0B


Total liabilities
₩218.7B


 - Unpaid wages
₩64.9B

Source: DART

Harim plans to use Pan Ocean, a shipping company, as the main vehicle to acquire Eastar Jet. Pan Ocean is the second-largest shipping company in Korea in terms of sales. As of the end of the first quarter, its cash equivalent assets stood at ₩150B. However, Harim is said to be seeking a FI (financial investor).What is Harim's big picture here, business-wise? Pan Ocean can expand its aviation logistics business by leveraging Eastar Jet's aviation resources. Harim plans to grow into a more comprehensive logistics company that encompasses sea and air.

Harim Holdings Stub with Pan Ocean: Eastar Jet Takeover Situation

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

It was announced after the market close on April 4th that <a href="https://www.smartkarma.com/entities/24064" target="_blank" data-smartkarma-citation="entities:24064:1">Jeil Holdings (003380 KS)</a>will merge with <a href="https://www.smartkarma.com/entities/18976" target="_blank" data-smartkarma-citation="entities:18976:1">Harim Holdings Co Ltd (024660 KS)</a>. After the merger, the NEWCO will be called Harim Holdings. Jeil Holdings currently has a market cap of 1.05 trillion won (US$990 million). Jeil Holdings currently have a 68.1% stake in Harim Holdings.Jeil Holdings is a holding company for the biggest chicken producer (Harim) and dry bulk shipper (PanOcean) in Korea. This merger should have a positive impact on…

It was announced after the market close on April 4th that Jeil Holdings (003380 KS)will merge with Harim Holdings Co Ltd (024660 KS). After the merger, the NEWCO will be called Harim Holdings. Jeil Holdings currently has a market cap of 1.05 trillion won (US$990 million). Jeil Holdings currently have a 68.1% stake in Harim Holdings.Jeil Holdings is a holding company for the biggest chicken producer (Harim) and dry bulk shipper (PanOcean) in Korea. This merger should have a positive impact on…

Korea M&A Spotlight: Jeil Holdings Merges With Harim Holdings

Equity Capital Markets

This report is part 2 of the Jeil Holdings IPO. Jeil Holdings is expected to complete its IPO in late June. Jeil Holdings is the Holdco for the biggest chicken producer &amp; dry bulk shipper in Korea.  <ul><li>Expected IPO offer price per share: 20,700 won (low)/ 22,700 won (high)</li><li>Number of Shares for IPO: 20.38 m shares (new shares)</li><li>IPO base deal size: US$377m (low);  US$519m (high)</li></ul>The following is how the bankers determined the IPO price range for Jeil Holdings: First, the value of its public affiliates, private affiliates, and brand value were added and net debt was subtracted, resulting in a value of 2.2 trillion won. After subtracting for holdco discount (20%), this resulted in a value of 1.8 trillion won. On a per share basis, this resulted in value per share of 25,300 won. After subtracting IPO discount rates of 10.3% to 18.2%, this suggested in IPO price range of 20,700 won to 22,700 won.

This report is part 2 of the Jeil Holdings IPO. Jeil Holdings is expected to complete its IPO in late June. Jeil Holdings is the Holdco for the biggest chicken producer &amp; dry bulk shipper in Korea.  Expected IPO offer price per share: 20,700 won (low)/ 22,700 won (high)Number of Shares for IPO: 20.38 m shares (new shares)IPO base deal size: US$377m (low);  US$519m (high)The following is how the bankers determined the IPO price range for Jeil Holdings: First, the value of its public affiliates, private affiliates, and brand value were added and net debt was subtracted, resulting in a value of 2.2 trillion won. After subtracting for holdco discount (20%), this resulted in a value of 1.8 trillion won. On a per share basis, this resulted in value per share of 25,300 won. After subtracting IPO discount rates of 10.3% to 18.2%, this suggested in IPO price range of 20,700 won to 22,700 won.

Jeil Holdings IPO (Part 2): Holdco for the Biggest Chicken Producer & Dry Bulk Shipper in Korea

<ul><li>Jeil Holdings is a holding company for the biggest chicken producer and dry bulk shipper in Korea. Jeil Holdings is expected to complete its IPO in June 2017. Size of the deal is expected to be about 500 billion won. Lead managers include KB Investment &amp; Securities and Shinhan Investment &amp; Securities. Jeil Holdings is part of the Harim Group. Currently, Harim Group has two holding companies, including Jeil Holdings and Harim Holdings. Jeil Holdings controls five publicly listed companies and 79 non-publicly listed Korean companies (57 in Korea and 22 overseas). Major shareholders of Jeil Holdings include Chairman Hong Gook Kim (41.78%) and Korea Thumb Vet Co. (37.14%).</li><li>The Harim Group has a vertically integrated business model, including a) producing chicken, cattle, and pigs; b) producing feedstuffs for these animals; c) shipping these products and their raw materials, and d) trading various raw materials including grains. The Harim Group has about 11,000 employees. In 2016, Jeil Holdings generated 6.2 trillion in sales (up 21.2% YoY) and operating profit of 451 billion won (up 28.4% YoY). It had 2.3 trillion won in equity and 7.1 trillion won in assets at end of 2016. </li><li>Other than <a href="https://www.smartkarma.com/entities/5279" target="_blank" data-smartkarma-citation="entities:5279:1">Pan Ocean Co Ltd (028670 KS)</a>, the other four listed companiees of Jeil Holdings, including <a href="https://www.smartkarma.com/entities/1166" target="_blank" data-smartkarma-citation="entities:1166:1">Harim Co Ltd (136480 KS)</a>, <a href="https://www.smartkarma.com/entities/18976" target="_blank" data-smartkarma-citation="entities:18976:1">Harim Holdings Co Ltd (024660 KS)</a>, <a href="https://www.smartkarma.com/entities/15842" target="_blank" data-smartkarma-citation="entities:15842:1">Farmsco (036580 KS)</a>, and <a href="https://www.smartkarma.com/entities/9821" target="_blank" data-smartkarma-citation="entities:9821:1">Sunjin Co Ltd (136490 KS)</a> are under the radar of many institutional investors because of their relatively low market cap and trading volume. As a result, if Jeil Holdings IPO is priced attractively, there could be a few institutional investors that may be interested in Jeil Holdings.</li></ul>

Jeil Holdings is a holding company for the biggest chicken producer and dry bulk shipper in Korea. Jeil Holdings is expected to complete its IPO in June 2017. Size of the deal is expected to be about 500 billion won. Lead managers include KB Investment &amp; Securities and Shinhan Investment &amp; Securities. Jeil Holdings is part of the Harim Group. Currently, Harim Group has two holding companies, including Jeil Holdings and Harim Holdings. Jeil Holdings controls five publicly listed companies and 79 non-publicly listed Korean companies (57 in Korea and 22 overseas). Major shareholders of Jeil Holdings include Chairman Hong Gook Kim (41.78%) and Korea Thumb Vet Co. (37.14%).The Harim Group has a vertically integrated business model, including a) producing chicken, cattle, and pigs; b) producing feedstuffs for these animals; c) shipping these products and their raw materials, and d) trading various raw materials including grains. The Harim Group has about 11,000 employees. In 2016, Jeil Holdings generated 6.2 trillion in sales (up 21.2% YoY) and operating profit of 451 billion won (up 28.4% YoY). It had 2.3 trillion won in equity and 7.1 trillion won in assets at end of 2016. Other than Pan Ocean Co Ltd (028670 KS), the other four listed companiees of Jeil Holdings, including Harim Co Ltd (136480 KS), Harim Holdings Co Ltd (024660 KS), Farmsco (036580 KS), and Sunjin Co Ltd (136490 KS) are under the radar of many institutional investors because of their relatively low market cap and trading volume. As a result, if Jeil Holdings IPO is priced attractively, there could be a few institutional investors that may be interested in Jeil Holdings.

Jeil Holdings IPO (Part 1): Holding Co. For the Biggest Chicken Producer & Dry Bulk Shipper in Korea

Equity Bottom-Up

On 28th April, <a href="https://www.smartkarma.com/entities/22647" target="_blank" data-smartkarma-citation="entities:22647">Ns Shopping Co Ltd</a> announced that it plans to purchase a large piece of land (27,600 pyoung or 91,083 sq meter) located in Yangjae (Seoul) through its 100% owned affiliate NBICorne Ltd for 452 billion won. The land is located in an excellent location in the southern Seoul area next to a major highway. <a href="https://www.smartkarma.com/entities/22647" target="_blank" data-smartkarma-citation="entities:22647">Ns Shopping Co Ltd</a> and the Harim Group will use this land to construct logistics, R&amp;D center, and other retail outlets. <a href="https://www.smartkarma.com/entities/18976" target="_blank" data-smartkarma-citation="entities:18976">Harim Holdings Co Ltd</a> is the controlling shareholder of <a href="https://www.smartkarma.com/entities/22647" target="_blank" data-smartkarma-citation="entities:22647">Ns</a>…

On 28th April, Ns Shopping Co Ltd announced that it plans to purchase a large piece of land (27,600 pyoung or 91,083 sq meter) located in Yangjae (Seoul) through its 100% owned affiliate NBICorne Ltd for 452 billion won. The land is located in an excellent location in the southern Seoul area next to a major highway. Ns Shopping Co Ltd and the Harim Group will use this land to construct logistics, R&amp;D center, and other retail outlets. Harim Holdings Co Ltd is the controlling shareholder of Ns…

Not Acting in the Best Interests of Equity Shareholders

South Korea

Harim Holdings Co., Ltd. is an investment holding company. The Company, through its subsidiaries, manufactures packaged chicken, and chicken products.

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Harim Holdings (024660 KS)

Harim Holdings Stub with Pan Ocean: Eastar Jet Takeover Situation

This post looks into the Harim Stub with Pan Ocean as the main subsidiary amid the Eastar Jet acquisition from a stub trade angle.

Sanghyun Park

Korea M&A Spotlight: Jeil Holdings Merges With Harim Holdings

It was announced after the market close on April 4th that Jeil Holdings (003380 KS)will merge with Harim Holdings Co Ltd (024660 KS). After the...

Douglas Kim

Jeil Holdings IPO (Part 2): Holdco for the Biggest Chicken Producer & Dry Bulk Shipper in Korea

This report is part 2 of the Jeil Holdings IPO. Jeil Holdings is expected to complete its IPO in late June. Jeil Holdings is the Holdco for the...

Douglas Kim

Jeil Holdings IPO (Part 1): Holding Co. For the Biggest Chicken Producer & Dry Bulk Shipper in Korea

Jeil Holdings is a holding company for the biggest chicken producer and dry bulk shipper in Korea. Jeil Holdings is expected to complete its IPO...

Douglas Kim

Not Acting in the Best Interests of Equity Shareholders

On 28th April, Ns Shopping Co Ltd announced that it plans to purchase a large piece of land (27,600 pyoung or 91,083 sq meter) located in Yangjae...

Douglas Kim

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